As recently as 2013, CNN described Myanmar’s banking system as “outdated and debased, open for decades to abuse by the previous regime, and shunned by about 90 percent of the population.”

The article described the story of a man who kept only a small portion of his money in the bank, and he only did that for fear of a house fire. The majority of his wealth he held in cash, in his home.

That story exemplified the skepticism with which people viewed the banking system, and the situation is not entirely different today. Mistrust of the financial system pervades the majority of Myanmar’s 53 million people.

But the circumstances are changing, thanks to Wave Money and other financial tech platforms that are democratizing financial services in the country. Access to online services has skyrocketed in Myanmar in recent years, with mobile phone penetration reaching at least 50% and 80% of first-time phone buyers choosing smartphones. Mobile phone penetration was roughly 10% in 2014.

Wave Money, a joint venture between Telenor, Yoma Bank, and First Myanmar Investments, developed its mobile money transfer platform in response to a growing need for simplified banking services.

“There’s a lot of urbanization,” Jones said, noting that people from more rural parts of the country are seeking job opportunities in Myanmar’s cities. “As people move from those regions, they need to send money home.”

Unfortunately, transferring money at traditional banks can take hours at a time and can only be done during regular operational hours. This leaves workers in the difficult position of choosing between lost productivity and getting money to their families. Wave Money presents a more accessible alternative.

“We saw an underlying need for money transfers that are available seven days a week, around the clock,” Jones said.

Since its launch in August, 100,000 users have signed up for the service. They’re able to transfer money via their smartphones or in person at Wave Money locations. Sign-up and user to user transfers are free, though people pay a small percentage for cash-outs. For example, a 50,000 kyat ($39) cash-out would carry a 1,000 kyat ($ 0.78) service charge.

Jones said users gravitate toward app-based transfers and that 75% of Wave Money’s activity occurs outside normal banking hours. This speaks to the demand for tech-based financial products in Myanmar’s growing economy, and apps aren’t the only necessary commodities.

Financial inclusion linked to economic growth

Financial inclusion is essential to economic development in emerging markets such as Myanmar. Widespread implementation of digital finance systems “could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025,” according to the McKinsey Global Institute.

Digitization in Myanmar would bring millions of people into the financial system formally, providing them access to secure, regulated, reliable services. Right now, the unbanked in Myanmar are extremely financially active, according to Upadhyay. However, they rely on unregulated lenders who charge monthly interest rates of 10 percent or more and can abscond with people’s savings with little to no consequence.

“Usually the pattern taken by these markets is that mobile financial services start with payments,” Upadhyay said. “Payments form the first backbone of financial inclusion.”

People don’t need to have too much faith in the banking system to send money back and forth with one another. But once they see that a company makes good on its promises and doesn’t exploit them, they’ll be willing to save or invest with them down the road. Mobile transactions also create records that people can use to eventually obtain credit and build up savings for investments. Regular, on-time payments to utilities companies or e-commerce subscriptions signal consumers’ abilities to repay loans or build savings.

A Myanmar bank staff from Asia Green Development bank counting Myanmar bank notes in downtown Yangon. As it strives to become Asia’s next economic star Myanmar, has set its sights on overhauling its battered and distrusted banking system. (Photo credit: Soe Than Win/AFP/Getty Images)

For this to happen on a broad scale in Myanmar, fintech organizations will need to establish trusted distribution networks, Upadhyay said. Agents will be on the frontlines of earning consumers’ trust and educating them about financial platforms.

Perhaps most importantly, people must become accustomed to using digital financial services beyond making money transfers or airtime top-ups for their phones.

“Where Myanmar can leapfrog other markets is by providing other use cases,” Upadhyay said. Paying bills, making tax payments, and purchasing products will spur adoption of fintech products and therefore financial inclusion. Of course, the platforms to do so must exist in order for that to happen.

The digitization of Myanmar

The fintech company ConnectNPay is helping both banks and utilities providers to digitize and streamline their payment systems. ConnectNPay is a joint venture between LeoTech and MCC Group, a local Myanmar conglomerate, which launched MyWalletPlus before pivoting into data digitization on a mass scale.

“We thought we would try to get into the wallet space, but it’s an incredibly crowded space, and the telcos are going to win that game,” said Patrick Kershaw, managing director of investments at Leo Tech and an advisor to ConnectNPay.

Recognizing that “core parts of the [financial] infrastructure were missing,” Kershaw said the company decided to provide a digitization and aggregation platform that would enable service providers to offer more efficient services. The Yangon City Development Council hired CNP to help streamline its services, and the company assisted in developing a billing system that generates 10 million bills each year and reduced billing cycles from 62 to six days.

The upshot for consumers is that rather than spend entire workdays waiting in line to pay utilities bills, the process takes a fraction of the time it once did. CNP’s services have also helped the city digitize tax payments, which Upadhyay says is a critical but often overlooked component of economic development.

“Because of the work CNP is doing, allowing people to make payments of their council tax – if a fintech startup can allow people to pay their taxes more easily, that can increase the tax revenue of the government, reducing fiscal deficit and improving the balance sheets of the exchequer,” Upadhyay said.

Building trust and economies through fintech

As Wave Money has encountered, a lack of trust makes people hesitant to embrace new platforms. Kershaw said ConnectNPay has been fastidious in its commitment to transparency for that reason, distributing performance numbers and offering flat rates for clients rather than engaging in negotiations.

The company currently maintains data backups and some operations in Singapore, but Kershaw said the goal is to move all functionalities into Myanmar during the first quarter of 2017.

“We’re trying to be an enabler, we’re trying to build the core building blocks so the economy can emerge,” he said.

Another important component of economic development is microfinance. The ability to secure loans to build businesses enables people to create financial foundations for themselves and their families, not to mention contribute to local economies.

“Microfinance is significant in ensuring that economic growth provides benefits for the general population and not just for those at the top,” said Jeremy Kloiser-Jones, founder and CEO of Bagan Capital. “As the fastest growing economy in the world … there is a huge need for credit to help ordinary Myanmar citizens grasp the opportunities to grow their businesses, or start new ones.”

Bagan Capital provides microfinance loans to small businesses and micro-enterprises. Kloiser-Jones said most of the organization’s clients are women who need capital for buying inventory or business supplies. He noted that job opportunities within traditional sectors or with the government often go to men, so microfinance enables women to develop their own economic security. The more stable their financial lives, the more they are able to invest in their families’ education and well-being, both of which influence social outcomes.

Kloiser-Jones said Bagan Capital conducts most of its client transactions in cash because the country is still largely a cash economy. But that’s likely to change in the next several years.

“Digital money in Myanmar is still in its infancy, but we are assessing product offerings and will integrate cashless transfers into our operations in the near future,” he said. “The incredible growth in telecommunications infrastructure and smartphone penetration has now made this a realistic tool.”

Fast-track to the future

One thing most people in Myanmar’s tech community will tell you is that change is happening fast and not always in predictable ways. Regulations and business opportunities can take months to come together but once they do, businesses must be ready to move immediately.

“It’s glacial and it’s lightning,” Kershaw said.

“All parts of the Myanmar financial system are trying to develop simultaneously, as everything is starting from a low base,” Kloiser-Jones said.

For a country that only reopened to foreign investment within the past decade, the rate of change is unprecedented.

“I’ve never witnessed anything like what I’ve experienced in that market,” Kershaw said. “It’s like four-dimensional chess and the rules change every day.”